Anthony Doesburg: Somewhere over the recession, clouds beckon

How has the IT industry fared in the recession? Even though it is an important supplier to financial businesses, and its fortunes might be expected to mirror theirs, it is difficult to think of any IT casualties from the downturn.

Those companies that have passed into oblivion recently, EDS and Sun Microsystems, were victims of forces other than the financial meltdown.

EDS, the IT services company started by one-time US presidential hopeful Ross Perot, was bought by Hewlett-Packard to round out its range to better match its main rival IBM.

Meanwhile, Sun, founded by maverick Scott McNealy and once a high-flyer in the mid-range computer hardware market, was bought at the start of the year by another larger-than-life figure, Larry Ellison, of software company Oracle and America's Cup fame.

Despite being able to claim its systems keep substantial parts of the internet going, and that the Java programming language it developed in the 1990s is widely used for web applications, Sun's fortunes have steadily dwindled since the dot-com bubble burst almost a decade ago.

Selling the company for US$7.4 billion ($10 billion) is not exactly the dream ending for McNealy, who made insulting Microsoft an art form (calling Windows a "fur ball" was a favourite slur), and who would consider the label "rabid capitalist" a compliment.

But he put a brave face in a message to staff when the deal went through, saying: "Oracle is getting a crown jewel of the technology industry. They will do great things with Sun. Do your best to support them and keep the Sun spirit alive and well in the industry."

Ellison, McNealy said, was "one of the greatest capitalists I have ever met" and, in the same vein, "I love the market economy and capitalism more than I love my company".

How galling must it be for McNealy that Microsoft - which he never lost an opportunity to point out was a monopolist - continues to prosper while Sun has gone.

In first quarter of this year Microsoft's net income rose 35 per cent, helped by sales of the latest fur ball, Windows 7. Other IT powerhouses also appear to be thriving.

IBM, HP and Apple are all reporting double-digit income growth, with Apple's profit almost doubling year-on-year in its latest quarter.

But can today's premier league - IBM and HP have annual sales fast approaching New Zealand's GDP - count on dominating the landscape indefinitely? Sun's fate suggests not. As has been a feature of the industry for the 50 years it has existed, new technology trends continually come along to test the adaptability of the big players.

The latest is cloud computing which, on paper, is a threat to the likes of IBM, HP and Microsoft, since it promises to deliver computing services much as utilities deliver electricity or water. If an organisation's accounting software is hosted in a "cloud" accessed via the internet, it no longer needs the servers and software licences those three companies sell.

But as IT analyst Ullrich Loeffler of IDC New Zealand points out, IBM and others aren't going to let cloud computing providers such as Google and Amazon steal their lunch.

For a start, the cloud is actually a highly secure, resilient data centre packed with computer hardware, software and storage - the very stuff they supply. Second, while helping new cloud providers equip their data centres, they're also building their own to compete. Apple might seem irrelevant in this but its newly released iPad could be the perfect device for skipping among the clouds.

Loeffler points out that there are opportunities for newcomers as well, both for application providers like Wellington company Xero and for outfits with a track record of providing reliable network services, without which the clouds will go unconnected. At the large end of the network scale is Gen-i, Telecom's IT business. Last week it launched an infrastructure as a service (IaaS) offering, ReadyCloud, which lets customers run their applications on its servers.

At the small end is Maxnet, a 12-year-old ISP based on Auckland's North Shore that sells a similar service. Maxnet is a company of 50 with turnover of $14 million, but having been started by a 15-year-old with capital from his mother's divorce settlement, the myth-making ingredients are up there with the best of the industry.

Sun's McNealy began saying as long ago as the 1980s that the network is the computer, anticipating the cloud computing trend. Perhaps it is fitting that a couple of old Sun New Zealand hands, John Hanna and Rod Severn, are today running Maxnet.

PC rebound

Worldwide sales of personal computers (desktops, portables and mini notebooks) were 24 per cent higher in the first quarter of this year than in the same period in 2009, says IDC.

More than 79 million PCs were shipped in the quarter, up from 63.7 million in the first quarter of 2009. Growth was especially strong in the Asia/Pacific region (not including Japan) - up 33 per cent.

Anthony Doesburg is an Auckland technology journalist